Chapter 3 Flashcards
(49 cards)
Financial Ratios
Profitability ratio
liquidity ratio
solvency ratio
relate to the companys performance in the current period
profitability ratios
it shows the companys ability to generate income
profitability ratio
relate to the companys short term survival
liquidity ratios
it shows the companys ability to use current assets to repay liabilities as they become due
liquidity ratios
it measures the short-term ability of the enterprise to pay its obligation and to meet unexpected needs for cash
liquidity ratios
relate to the companys long-run survival
solvency ratios
it shows the companys ability to repay lenders when debt matures and to make the required interest payments prior to the date of maturity
solvency ratio
Ratios in Profitability
Net profit margin or return on sales
Return on total assets
Return on Equity
Gross profit percentage
asset turnover
fixed asset turnover
earnings per share
price/earnings ratio (P/E)
Dividend yield
dividend pay-out
represents the percentage of revenue that ultimatelt makes it into net income, after deducting expense
net profit margin or return on sales
it determines the amount of income by owners
net profit margin or return on sales
efficiency with which assets are used to. operate a business
return on total assets
it compares the amount of net income to average stockholders equity
return on equity
it reports the net amount earned during the period as a percentage of each peso contributed by stockholders and retained in the business
return on equity
it indicates how much profit was made, on average, on each peso of sales after deducting the cost of goods sols
gross profit percentage
it indicates the amount of sales revenue generated for each peso invested in assets during the period
asset turnover
it indicates how much revenue the company generates for each peso invested in fixed assets
fixed asset turnover
it indicates the amount of earnings generated for each share of outstanding common stock
earnings per share
it indicates the number of pesos required to buy 1.00 or earnings
Price/Earnings Ratio
it measures the rate of return in the investors common stock investments
dividend yield
it indicates the proportion of earnings distributed as dividends
dividend pay-out
Ratios in Liquidity
Current ratio
quick ratio
cash ratio
receivables turnover
average age of receivables or days sales outstanding
inventory turnover
average age of inventory or days in inventory
raw materials inventory turnover
goods in process turnover
days in operating cycle
trade payables turnover
average age of trade payables or days in trade payables
cash conversion cycle
current asset turnover
it measures the companys ability to pay its current liabilities
current ratio
it is a measure of adequacy of working capital
current ratio
